As you approach retirement, you finish paying off the mortgage and the children move out of the house. At this point in life, you are left without dependents, so you do not have to worry about your family too much. Instead, you should start worrying about your future financial situation! When you retire you lose your most important source of income: your job! Medical problems are also very common and you have to make sure that you do not run out of money during retirement!
Understanding life and long-term care insurance
Life insurance: you buy this policy to protect your dependents from financial difficulties. If you have relatives, like children that depend on your income a life insurance policy will give a death benefit if you die. Your beneficiaries can use the money to pay for your funeral and as supplemental income. In exchange for coverage, you pay regular premiums!
Long-term care insurance: you buy this policy to protect yourself from financial difficulties. This insurance type covers a part of the long-term care costs which you may need if one day you will be unable to do daily living activities like: dressing, eating, walking, bathing etc. Statistics show there is a 70% chance that you will need long-term care services after age 65. Many covered services are not covered by health insurance policies or Medicare programs.
Which is better?
If you do not have any dependents left, you should switch from life coverage to long-term care insurance. Your children will not need financial protection anymore, so keeping a policy will just drain your retirement funds. If you want to pay for your funeral costs, you can do that by purchasing last expense insurance with a small coverage of $10,000-$20,000!
If you become unable to do daily living activities, the cost of nursing homes and medical staff, needed to take care of you, will be very expensive! You should prioritize getting coverage during your 50s! However, if your children are in financial problems you might want to hang on to life insurance! Permanent life coverage policies allow you to borrow against the policy. The loan can be used to cover long-term care expenses!
Why not have both?
If keeping your life coverage is essential, you can buy an extra rider which allows you to use the policy's benefit to pay for long-term costs, if you need it. If not, your beneficiaries will receive the full amount.
Life coverage and long-term care can go hand in hand and you do not necessarily have to choose. However there are situations when you do not need both policies! If you do not have dependents anymore, you can drop the life coverage policy!
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